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Jenny Lind, Taylor Swift, and Me

February 24, 2015 1:31 pmFebruary 24, 2015 1:31 pm

First things first: I am a big Arcade Fire fan, but I had nothing to do with Will Butler’s new song about the Greek debt crisis. I will, however, be on a panel at SXSW with the Butler brothers among others. And I’m having an economist’s version of fun by looking at some not entirely random aspects of the economics of music.

Actually, Connolly and Krueger were here first, and offered much more systematic work than I have any intention of doing. But I may have some odds and ends to contribute.

So here’s how I’ve been approaching it: I’m coming at this subject from the vantage point of superstar theory, and asking whether the scrappy data we have seem to support that theory. And yes, there is something called superstar theory, after a classic paper by Sherwin Rosen; his motivating example was comedians, but it obviously seems to bear on musicians too.

Rosen’s argument, more than 30 years ago, was that technology was leading to sharp increases in inequality among performers of any kind, because the reach of talented individuals was vastly increased by mass media. Once upon a time, he said, all comedians had to entertain live audiences in the Borscht Belt; some drew bigger, better-paying crowds than others, but there were limits to the number of people one comic could reach, and hence limits on the disparity in comedian incomes. In modern times, however, an especially funny guy can reach millions on TV; an especially talented band can sell records around the world; hence the emergence of a skewed income distribution with huge rewards for a few.

What makes this an interesting story for music is that what technology gave, it is now taking away: digital, streamed music is hard to monetize, so that artists are forced back on live performance. So you might expect to see some equalizing of incomes taking place.

But the more I look into this, the less I think this story works, at least for music.

First of all, the big lesson I learned from Connolly and Krueger is that musicians, as opposed to the industry, never made much money from recordings. C&K tell us that in 2002 – which was close to the peak of the golden age of CDs – the biggest bands made more than 7 times as much from touring as they did from royalties. Basically, for musicians it has always been about live performance.

Now, this income from performance is highly concentrated. But does this reflect something special about modern communication technology? Maybe not. Let me offer two comparisons, one more fun than the other.

The not-fun comparison: How does the concentration of income among financially successful musicians compare with the distribution of income among financially successful Americans in general? We know that top incomes tend to roughly fit a Pareto distribution, in which, say, the 99th percentile is to the 99.9th as the 99.9th is to the 99.99th. The Piketty and Saez data (xls) tell us that in 2013 income at the 99.99th percentile was 4.38 times as high as income at the 99.9th, which in turn was 3.88 times as high as income at the 99th.

Meanwhile, the Billboard rich list has the 4th highest-paid band, Bon Jovi (sigh), making 3.65 times as much as the 40th artist, Carrie Underwood (oh well). Given the fuzziness of these numbers, I’d say that income inequality among financially successful bands looks about the same as inequality among financially successful Americans in general. In fact, it’s kind of startling how undistinctive the business of being a big-money musician seems to be.

But are the big incomes of music superstars something new, or at least a late 20th-century development? Well, let’s take an example where there are pretty good numbers: Jenny Lind, the famous soprano, who toured America from 1850 to 1852.

Tickets at Lind’s first concert sold for an average of about 6 dollars, which seems to have been more or less typical during the tour. Adjusting for inflation, that’s the equivalent of around $180 today, which isn’t too shabby (a lot of the indie concerts I go to are $15-20, although they also make money on beer). But you also want to bear in mind that real incomes and wages were much lower, so that these were actually huge ticket prices relative to typical incomes.

Overall, Lind was paid about $350,000 for 93 concerts, or a bit less than $4,000 a concert. If we adjust for the rise in GDP per capita since then, this was the equivalent of around $2 million a concert today. In other words, to a first approximation Jenny Lind = Taylor Swift. And this was in an era not only without recordings, but without amplification, so that the size of audiences was limited by the acoustics of the halls and the performer’s voice projection.

What all this suggests to me, at least, is that the economics of being a financially successful musician aren’t that different from success in other walks of life, and haven’t changed that much over the long run despite huge changes in technology and tastes. Basically, musicians are just like bankers, except for the business about saving our souls versus destroying them.